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U.S. panel backs Chinese A123 bid

“Technology produced by A123 and funded by U.S. taxpayers should not simply be shipped off to China so that the military applications for these materials can be reproduced abroad,” said Sen. John Thune (R-S.D.), ranking member of the Commerce, Science and Transportation Committee.

“We don’t have any answers on what will happen to the technology funded by the U.S. taxpayers,” Sen. Chuck Grassley (R-Iowa) said. “We don’t have any answers on whether U.S. national security concerns are protected. The only thing that’s clear is a foreign-owned company will benefit from the millions of dollars given to A123 through the president’s stimulus package. That’s troubling.”

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Thune and Grassley, who have been outspoken about their concerns over the deal and lobbied CFIUS to reject it, said they have asked the panel for a briefing on the matter.

Such a meeting is unlikely to move the committee to change its mind, said Joshua Zive, an attorney at Bracewell & Giuliani who has worked on CFIUS reviews before. The firm is not involved in the Wanxiang-A123 deal.

“The problem is these sort of decisions ricochet across the investment community,” Zive said. “Every foreign investor who might be looking at an acquisition would view that as a concerning development. At least you want to know if you go through the process, you have some degree of certainty.”

Rep. Marsha Blackburn (R-Tenn.), meanwhile, has introduced legislation requiring companies that get DOE funding to report if they are acquired by a “non-allied foreign nation” and to repay any Department of Energy grants or loans.

Wanxiang did not buy A123’s government and military contracts, which instead went to the U.S. company Navitas Systems for $2.25 million.

That side deal probably helped move Wanxiang’s purchase of A123 forward by removing those contracts as national security concerns, Zive noted.

CFIUS, an interagency panel whose members include the secretaries of Treasury, State and Energy, reviews the national security implications of certain investments in the U.S. by foreign interests and can recommend that the president block some sales.

The committee made news last year when it recommended blocking the purchase of several Oregon wind projects near a Navy base by the Chinese firm Ralls Corp. Obama ultimately blocked that purchase, citing national security concerns.